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The Memorandum of Association (MOA) is crucial for any company's establishment and serves as its constitution, outlining the company's powers and operating framework. In situations where there is a conflict between the Companies Act and the Memorandum's clauses, the law takes precedence. The objectives of the company, known as objects in the Memorandum, define its purpose and boundaries of operation. It is imperative for a company to adhere to its objects, as any actions beyond them would be considered ultra vires and therefore invalid. When entering into contracts or agreements with third parties, the Memorandum is utilized as a public document.
Understanding the Memorandum of Association (MoA)
The Memorandum of Association (MOA) of the Company includes the following clauses:
Name Clause
This clause, which is the first in every MOA, must state the Company's name with the suffix Private Limited, Limited, OPC Private Limited, based on the type of Company. This requirement does not apply to Section 8 Company.
Registered Address Clause
This clause indicates the state where the Company's registered office is located.
Object Clause
It outlines the purposes for which the Company is established.
Liability Clause
It specifies whether the members' liability is limited or unlimited.
Capital Clause
This final clause details the Company's capital. The Company must mention the Authorized Capital and the number of shares it is divided into. Authorized Capital represents the maximum fund the Company can raise.
Contents of the Memorandum of Association (MOA)
The Object Clause of the Memorandum of Association specifies a detailed list of activities that the Company will undertake upon its incorporation. This clause outlines two main parts: the primary activity and activities that are ancillary to the main business. The Company is restricted from engaging in any business activities that fall outside the scope of its stated objectives. In this article, we will explore the object clause and the process for amending it to allow for business activities beyond those initially outlined in the MOA.
What is the Object Clause in the Memorandum of Association of a Company?
If the Company wishes to engage in a business activity not specified in its object clause, it must first amend the clause to include the new objectives through the prescribed secretarial process:
1. Hold a Board Meeting.
2. Issue a 7-day notice for the Board Meeting to discuss the agenda:
- Obtain directors' approval to amend the Memorandum's object clause.
3. Determine the date, time, and venue for convening an Extraordinary General Meeting (EGM) to seek shareholders' approval for the object clause amendment.
4. Approve the EGM notice, agenda, and explanatory statement in accordance with Section 102 of the Companies Act 2013.
5. Conduct the EGM.
6. Obtain shareholders' approval through a special resolution passed during the EGM, requiring a three-fourth majority. Listed companies must then send a copy of the resolution and related details to the stock exchange where their shares are listed. Special Resolution must be passed by Postal Ballot in specific cases, such as:
- Companies with over 200 members.
- Companies with unutilized funds raised through a prospectus issue.
7. File the resolution amending the object clause in the Memorandum of Association (MOA) with the Registrar of Companies (ROC) using Form MGT-14, along with the prescribed fee within 30 days of passing the resolution. Attachments to be included are:
- Notice of EGM.
- Copy of the Special Resolution.
- Amended MOA.
- Copy of the Board resolution.
8. Obtain approval from the ROC, who will review the application and, upon satisfaction, approve the alteration and certify the registration within 30 days of receiving the Special resolution.
The Procedure to Amend the Object Clause of a Company's MOA
The Memorandum of Association (MOA) serves as the cornerstone of any incorporated company. It acts as the company's constitution and delineates the boundaries of its powers and rights. Should a conflict arise between the Companies Act and the provisions of the Memorandum, the law takes precedence.
The Objects clause in the Memorandum specifies the company's objectives for its establishment. The company must not operate outside the scope of its objects clause. Any actions contrary to the Memorandum render transactions ultra vires and void. When the company engages in contracts or agreements with third parties, the Memorandum becomes a public document.
Summary
What are the key points for a better understanding of MOA?
Following key-points to be remembered
Company is permitted to subscribe through an agent
Minor cannot sign the subscription sheet in MOA and shall be signed by a guardian who is acting on his behalf.
It is upon the discretion of the Company to add any further additional points other than those mentioned provisions
What are the additional points for Public Company to alter its object clause?
What are the restrictions for the alteration of Object Clause as per Section 13(2)?
What are the different provisions for Object Clause as per old and new act?